Ken Clarke hopes he can reduce the prison population by 3,000 by 2014. Photograph: Martin Argles for the Guardian

The justice secretary, Ken Clarke, will today detail his plans to divert thousands of offenders from prison to bring to an end the Victorian-style "bang 'em up" culture and reduce high reoffending rates.

The green paper on sentencing is expected to mark a breach with the "prison works" philosophy introduced by Michael Howard in 1992.

Clarke aims to bring down 60%-plus reoffending rates for short-term prisoners through a "rehabilitation revolution" that could result in the current prison population of 85,500 being reduced by 3,000 by 2014.

Clarke said there were "big failings" in the system, evidenced by high reoffending rates.

While prison is there to punish people, "far more" should be done to ensure they don't reoffend once they are released, as well as stop "remorseless rise" in people being sent to prison in the first place.

Clarke told BBC Radio 4's Today programme the prison system was failing to stop a criminal underclass who just commit "more crime" as soon as they come out because underlying problems such as drug abuse and mental illness issues were not being tackled, and a lack of support for those able to "go straight" to get a job.

"That is where we should now be devoting our attention," said Clarke.

"What has been happening is there has been a huge increase in the number of people in prison, which is not only good value for money, but even more importantly I don't think that is the right way to keep on protecting people ... some of my critics think you should put more and more people in prison for longer and longer and longer. I personally don't think that is the best way of protecting society."

He went on: "We have to stop having this revolving door where people go in prison, serve their time and within less than a year half of them have committed more crime."

Clarke's mission statement was challenged by both the prison officers' union and his colleague Lord Howard, the former Tory home secretary, who said Clarke was wrong to think that he could reduce the prison population and keep the crime rate down.

Howard, who famously claimed in 1993 that "prison works", said that he welcomed Clarke's approach to rehabilitation, but disagreed with his suggestion that the fall in crime since 1993 has nothing to do with the rise in the prison population.

Howard told the BBC Radio 4 Today programme: "We have seen a very significant increase in the prison population since 1993 and an almost halving in the rate of crime. These two things have gone together — they are connected."

He also rejected arguments that crime fell during the past two decades because of increasing prosperity, pointing to recession of the past few years.

"There is simply no correlation between the amount of crime and economic conditions. There is a direct correlation between the number of people in prison and the amount of crime," said Howard.

"It is obvious – if persistent serious criminals are in prison, they can't commit crimes against the public."

The Ministry of Justice has earmarked up to six smaller jails for possible closure, including Dartmoor, Shepton Mallet, Shrewsbury, and North Sea Camp, Lincolnshire, and scaled back Labour's prison building programme.

The green paper was postponed from last Wednesday amid presentational concerns raised by Downing Street about its impact on Tory backbenchers who have already raised objections to the more liberal approach.

Its publication comes as it emerged that the UK government has promised the European court of human rights it will introduce draft legislation soon to extend voting rights for prisoners.

The green paper will include measures that will see: • Thousands of offenders with mental health, alcohol or drug abuse problems diverted into treatment programmes.

• Fewer minors remanded in custody.

• A 50% sentence reduction, rather than the current 30% available, for defendants who plead guilty early.

• An end to the recall to prison of those released on licence who breach their release conditions for technical reasons.

• Reform of sentences for public protection, with the minimum time before release increased from two to five years.

• Accelerated consideration for release for the 3,000 prisoners jailed indefinitely for the public protection who have already passed their tariff date.

• Prisons made places of hard work to prepare offenders for life outside.

• Moves to allow the private and voluntary sectors to bid to run pilot community payback schemes, including unpaid work, with payment by results.

• The extension of schemes under which offenders apologise to victims and make reparations before sentencing.

• An extension to the Peterborough pilot scheme of financing rehabilitation work in prison through the use of a social impact bond using funds from charitable trusts.

Clarke is expected to try to soften the impact on Tory MPs by highlighting the use of tougher community penalties and stressing that he will be keeping short prison sentences of less than 12 months.

Geoff Dobson of the Prison Reform Trust said the green paper provided an opportunity to consult widely on measures that could be shown to prevent crime and end the criminal justice equivalent of the arms race: "It could be a watershed moment, shifting the focus from talking tough to concentrating scarce public funds on what works."

But Harry Fletcher of Napo, the probation union, said the green paper was motivated by an ideological wish to drive down costs and introduce the private sector. "It is proposing the privatisation, expansion and rebranding of unpaid work. Unpaid work, or community service, as it was originally known, has been an integral part of the Probation Service's work since 1976. Last year 52,671 offenders commenced unpaid work," he said.

"Just under a third either failed to complete their hours or were convicted of a further offence. The government is planning to sharply increase the number of persons sentenced to unpaid work but it is extremely difficult to see where the placements will come from. In order to make a profit, the private sector will either use fewer staff or put offenders in larger and more dangerous groups. Cutting costs will lead to greater reoffending."

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